Bear Put Spread Strategy with example

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Bear Put Spread Strategy with Example (Moderate Bearish Strategy)

The Bear Put Spread is a popular moderately bearish options strategy used when you expect the market to fall gradually, but not sharply.

It is a limited risk, limited reward strategy, making it ideal for traders who want controlled downside exposure with lower cost than buying a single put option.

What Is a Bear Put Spread?

A Bear Put Spread involves:

  • ✅ Buying one Put Option (higher strike price)

  • ✅ Selling one Put Option (lower strike price)

  • ✅ Same expiry date

  • ✅ Same underlying (e.g., Nifty)

⚠ Important:
Both options must have different strike prices.
If you use the same strike price, it is not a spread — it becomes a neutral or closed position.

When to Use Bear Put Spread?

You should use this strategy when:

  • 📉 You expect the market to fall moderately

  • 📊 Market is weak but not crashing

  • 💰 You want limited risk

  • 💵 You are comfortable with capped profit

This strategy works best in a slow downward trending market.

Example: Nifty Bear Put Spread

Let’s understand with a practical example:

  • Buy Nifty 25700 PE @ ₹150

  • Sell Nifty 25500 PE @ ₹70

Step 1: Net Premium Paid

Net Premium = 150 – 70 = ₹80

So, your maximum risk is ₹80 per lot.

Payoff Structure

1️⃣ Maximum Loss

Maximum Loss = Net Premium Paid
= ₹80

This happens if Nifty expires at or above 25700.

2️⃣ Maximum Profit

Difference between strikes = 25700 – 25500 = 200

Maximum Profit = Spread – Net Premium
= 200 – 80
= ₹120

This happens if Nifty expires at or below 25500.

3️⃣ Break-even Point

Break-even = Higher Strike – Net Premium
= 25700 – 80
= 25620

Nifty must close below 25620 to start making profit.

Payoff Summary Table

Nifty Expiry LevelResult
Above 25700         ₹80 Loss
25620     No Profit No Loss
25600       Partial Profit
Below 25500   ₹120 Maximum Profit

Why Use Bear Put Spread Instead of Long Put?

Long PutBear Put Spread
       Higher Cost      Lower Cost
  Unlimited Profit      Limited Profit
  Higher Premium Risk      Lower Risk
 Best for Strong Crash    Best for Moderate Fall

Advantages

✔ Limited Risk
✔ Lower Capital Requirement
✔ Better Cost Efficiency
✔ Suitable for Controlled Bearish View

Disadvantages

✘ Profit is capped
✘ Not suitable for sharp crash
✘ Requires correct strike selection

Final Conclusion

The Bear Put Spread is an excellent strategy for moderate bearish market conditions.

In the above example:

  • Maximum Loss = ₹80

  • Maximum Profit = ₹120

  • Break-even = 25620

If you expect Nifty to move between 25700 to 25500 downward range, this strategy provides a smart and disciplined bearish position with controlled risk.


#OptionsTrading #BearishStrategy #NiftyTrading #OptionsEducation #StockMarketIndia

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